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Smartkarma Daily Briefs

Nov 24
0

Daily Brief China: Oriental Watch, Giant Biogene Holding , Xiaomi Corp, ZJLD Group , BOC Aviation and more

By | China, Daily Briefs

In today’s briefing:

  • Oriental Watch (398 HK): H1 FY24 Lower than Expectation But A 15% Div Yield, Cash >60% of Mkt Cap
  • 2024 High Conviction – Giant Biogene – Growth Rate Keeps Moving Higher
  • [Xiaomi Inc.(1810HK,SELL,TP HK$12.6) Earnings Review]: Mi14 Success Does Not Alter Overall Headwinds
  • 2024 High Conviction – ZJLD – Buoyed by a Premiumisation Shift
  • BOC Aviation (2588 HK, BUY, TP:HKD70): High Quality Safe Bet

Oriental Watch (398 HK): H1 FY24 Lower than Expectation But A 15% Div Yield, Cash >60% of Mkt Cap

By Sameer Taneja

  • Oriental Watch (398 HK) reported an 8% YoY profit decline for H1 FY24 (Vs. our expectation of 10-15% growth) due to a higher taxation rate and lower margins in HK. 
  • Despite that, the company distributed 100% of its profits for a 28.5 cent HKD/share dividend (15% annualized) and built net cash/investments to 1.25 bn HKD (62% of market cap). 
  • Trading at 7x FY24e PE with abundant cash and real estate with a 15% yield, the stock is worth exploring with the perspective of building a high-yield portfolio.

2024 High Conviction – Giant Biogene – Growth Rate Keeps Moving Higher

By Sumeet Singh

  • Giant Biogene was listed in Hong Kong IPO in 2022. It has done well since and is now trading 45% above its IPO price, but its still cheap.
  • GB is a leader in the bioactive ingredient-based professional skin treatment product industry in China.
  • In this note, we will talk about the company’s past performance and future prospects.

[Xiaomi Inc.(1810HK,SELL,TP HK$12.6) Earnings Review]: Mi14 Success Does Not Alter Overall Headwinds

By Eric Wen

  • Xiaomi reported C3Q23 top-line, non-GAAP EBIT, and GAAP net profit (2%), 7% and in-line vs. our est., and in-line, 4%, and 13%, vs. consensus respectively.
  • Xiaomi’s recent run could be short lived, as (1) Huawei will soon launch mid-range 5G handsets, (2) the Mi 14 will soon face new high-end Android competition;
  • And (3) its underinvested EV project could disappoint. We maintain our SELL rating and HK$ 12.6 TP, implying 28x CY24 P/E.

2024 High Conviction – ZJLD – Buoyed by a Premiumisation Shift

By Clarence Chu

  • In Apr 2023, ZJLD Group (6979 HK) raised around US$676m in its HK IPO. While it initially had a turbulent listing, the shares are now trading above its IPO price.
  • ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu. 
  • In this note, we will talk about the company’s past performance and future prospects.

BOC Aviation (2588 HK, BUY, TP:HKD70): High Quality Safe Bet

By Mohshin Aziz

  • BOC Aviation (2588 HK) (BOCA) is the highest-quality aircraft leasing company, with a young asset portfolio, quality clientele, cheapest credit facility, and superb risk management.      
  • Outlook is attractive, strong demand and scarce supply ensures high lease rates and profits. Asset disposals have all recorded a healthy surplus, a potential earnings surprise. 
  • Our TP of HKD70/share implies 0.94x FY24 (22% UPSIDE) potential 

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Nov 24
0

Daily Brief United States: NVIDIA Corp, Hollysys Automation Technologies, Intel Corp, Crude Oil, Cirrus Aircraft and more

By | Daily Briefs, United States

In today’s briefing:

  • NVIDIA. Another Beat & Raise, Yet Shares Slide. But Why?
  • Hollysys (HOLI US): Progress as a Binding Proposal Targeted for Mid-December
  • A Turnaround Story for Intel by Accelerating 3nm Outsourcing to TSMC?
  • EIA and OPEC Watch: Depending on Nigeria and Iran
  • Cirrus Aircraft Pre-IPO – PHIP Updates – Increased Customer Demand Continues to Drive Growth

NVIDIA. Another Beat & Raise, Yet Shares Slide. But Why?

By William Keating

  • Q3FY24 revenues of 18.1 billion, up 34% QoQ and up a staggering 206% from the year ago period. It was also ~$2 billion higher than the guided number
  • NVIDIA’s current quarter forecast was for a further revenue raise of almost $2 billion with gross margins staying roughly flat at 74.5%
  • Share price reaction was negative, closing down 2.5% the following day. But why?

Hollysys (HOLI US): Progress as a Binding Proposal Targeted for Mid-December

By Arun George

  • The Hollysys Automation Technologies (HOLI US) Board has finally succumbed to shareholder pressure by targeting a special meeting of shareholders in the week commencing 22 January 2024.
  • The special meeting is a side event as the Board targets a binding proposal by mid-December, with some bidders proceeding to the confirmatory due diligence stage.
  • The BVI takeover structure and Hollysys’ undemanding valuation facilitate a competitive bidding process. A 10% uplift to the current highest offer (Recco’s US$26.50 offer) is possible.

A Turnaround Story for Intel by Accelerating 3nm Outsourcing to TSMC?

By Andrew Lu

  • By offering 15k and 30k/m 3nm capacity by 4Q24/4Q25 to Intel, TSMC will see Intel becoming one of its top 3 customers by accounting for 12% of TSMC 2025 sales
  • By leveraging 3nm outsourcing, Intel will have incremental sales/capacity growth of 19-20% per year by accounting for 28%/44% of sales in 2024/2025, beating consensus’ 14%/9% y/y sales growth for 2024/2025.
  • We estimate 30-35% 5 years EPS CAGR for Intel, driven by TSMC’s 2/3nm foundry support, lower cost and process R&D, lower capex and depreciation cost, and AI PC CPU launch.

EIA and OPEC Watch: Depending on Nigeria and Iran

By Andreas Steno

  • Welcome to our weekly EIA watch paired with a few remarks on the postponed OPEC meeting.
  • We have had a look at OPEC production and export numbers, and it seems like production is much more price bullish than actual net exports (meaning a draw on local OPEC inventories)
  • Interestingly, the US, Nigeria, Iran, UAE (among others) have managed to fill a lot of the production gap left open by left open by Saudi Arabia.

Cirrus Aircraft Pre-IPO – PHIP Updates – Increased Customer Demand Continues to Drive Growth

By Ethan Aw

  • Cirrus Aircraft (0153126D US) is looking to raise up to US$200m in its upcoming HK IPO.
  • Cirrus Aircraft designs, develops, manufactures, and sells premium aircrafts. Its two aircraft product lines, the SR2X Series and the Vision Jet, are currently certified and validated in over 60 countries.
  • We had covered the company’s performance in our earlier notes. In this note, we talk about its PHIP updates.

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Nov 24
0

Daily Brief Indonesia: Adani Ports & Special Economic Zone, Erajaya Swasembada and more

By | Daily Briefs, Indonesia

In today’s briefing:

  • Morning Views Asia: Adani Ports & Special Economic Zone, Agung Podomoro Land
  • Erajaya Swasembada (ERAA IJ) – Coming Out a Squall

Morning Views Asia: Adani Ports & Special Economic Zone, Agung Podomoro Land

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

Erajaya Swasembada (ERAA IJ) – Coming Out a Squall

By Angus Mackintosh

  • Erajaya Swasembada (ERAA IJ) had a tempestuous 3Q2023, with one-off write-downs of inventory in both Indonesia and Malaysia, despite booking strong sales and gross profit growth overall. 
  • The company has also expanded its store network more aggressively in 9M2023, which meant higher opex and financing to build the new inventory, whilst stores take time to ramp up. 
  • Erajaya should see a recovery in 4Q2023, given plans to limit store expansion plus a lack of write-offs. Trading on 5x FY2024E PER with forecast +25% EPS growth is attractive.

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Nov 24
0

Daily Brief India: Juniper Hotels, Adani Ports & Special Economic Zone, Fedbank Financial Services and more

By | Daily Briefs, India

In today’s briefing:

  • Juniper Hotels Pre-IPO – Has Been Recovering Well
  • Morning Views Asia: Adani Ports & Special Economic Zone, Agung Podomoro Land
  • Fedbank Financial IPO – Strong Sector Momentum, but This One Doesn’t Seem Particularly Compelling

Juniper Hotels Pre-IPO – Has Been Recovering Well

By Sumeet Singh

  • Juniper Hotels (JH) is looking to raise up to US$217m in its upcoming India IPO.
  • Juniper Hotels is the largest owner by no. of keys of Hyatt affiliated hotels in India as of 2Q23 (30th Jun 23), according to Horwath.
  • The company is jointly held by Saraf Hotels and its affiliate, Juniper Investments and Two Seas Holdings (an indirect subsidiary of Hyatt Hotels Corporation).

Morning Views Asia: Adani Ports & Special Economic Zone, Agung Podomoro Land

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

Fedbank Financial IPO – Strong Sector Momentum, but This One Doesn’t Seem Particularly Compelling

By Clarence Chu

  • Fedbank Financial Services (0702066D IN) is looking to raise about US$130m in its India IPO.
  • Fedbank Financial Services (Fedbank) is a retail-focused non-banking finance company (NBFC) promoted by The Federal Bank Limited.
  • In this note, we will look at past performance, and share our thoughts on valuation.

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Nov 24
0

Daily Brief Japan: Carenet Inc, Aeon Co Ltd, Watts Co Ltd, TSE Tokyo Price Index TOPIX and more

By | Daily Briefs, Japan

In today’s briefing:

  • CareNet (2150) – Watch the TOPIX Birdy (Smallcap)
  • Aeon and Seven & I to Create Ecosystems Via Financial Services
  • Watts Finally Reacts to Margin Squeeze
  • Women’s Many Part-Time Jobs, Few Managerial Positions, and Short Tenure Are the Same Rooted Problems

CareNet (2150) – Watch the TOPIX Birdy (Smallcap)

By Travis Lundy

  • Carenet Inc (2150 JP) is a “medical contents” provider. It acts as a distributor of information to doctors and medical practitioners over the internet, and also consults with pharmaceutical companies.
  • On Wednesday, they announced that they were going to move from TSE Growth to TSE Prime as of 29 November.
  • At ¥31bn market capand this may turn people off, but it may be a treat for some. There is a reason why there are some big holders.

Aeon and Seven & I to Create Ecosystems Via Financial Services

By Michael Causton

  • Aeon and Seven & I both have large financial services arms, generating a substantial share of consolidated profits.
  • With cashless payments now the norm, the old business models that relied on fees for cash dispensing are fast becoming outdated.
  • Both retailers plan major changes to create ecosystems that should deliver a lot more data to improve targeted marketing for e-commerce and retail stores.

Watts Finally Reacts to Margin Squeeze

By Michael Causton

  • The ¥100 Shop chains are facing higher COGS on one side and rising wages on the other, a problem when you run a fixed price chain at just ¥100. 
  • Most (except Seria Co Ltd (2782 JP)) have reacted by introducing new, higher priced lines led by Daiso.
  • Watts, the smallest chain, is now catching up and higher priced lines will make up a third of stock by 2027.

Women’s Many Part-Time Jobs, Few Managerial Positions, and Short Tenure Are the Same Rooted Problems

By Aki Matsumoto

  • The same problem underlies the fact that women are more likely to be part-time/ non-regular workers, as well as the lower percentage of management positions and shorter length of service.
  • Setting targets and implementing measures for % of female managerial positions is important, since the higher ratio will narrow the gender wage gap, but this alone is not sufficient.
  • It’s necessary to ensure that women have the same position in workplace even if they leave the workforce, and to change social systems and people’s mindset to support child care.

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Nov 23
0

Daily Brief Quantitative Analysis: KRX Short Interest Weekly (Nov 17th): Short Covers for Celltrion and more

By | Daily Briefs, Quantitative Analysis

In today’s briefing:

  • KRX Short Interest Weekly (Nov 17th): Short Covers for Celltrion, Celltrion Health, Amorepacific

KRX Short Interest Weekly (Nov 17th): Short Covers for Celltrion, Celltrion Health, Amorepacific

By Ke Yan, CFA, FRM

  • We analyzed the changes in short interest of KRX Stocks as of Nov 17th which has an aggregated short interest worth USD11.9bn.
  • We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases & decreases in short value, short as multiple of ADT.
  • We highlight short interest changes in Celltrion, Celltrion Health, Amorepacific.

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Nov 23
0

Daily Brief ECM: Zeekr Pre-IPO – Thoughts on Valuation and more

By | Daily Briefs, ECM

In today’s briefing:

  • Zeekr Pre-IPO – Thoughts on Valuation
  • Tata Technologies IPO- Forensic Analysis
  • DS Dansuk IPO Valuation Analysis

Zeekr Pre-IPO – Thoughts on Valuation

By Sumeet Singh

  • ZEEKR (ZK US), a premium EV brand by Geely Auto (175 HK), aims to raise around US$500m in its US listing.
  • Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
  • We have looked at the company’s past performance and undertaken a peer comparison in our earlier notes. In this note, we will talk about valuations.

Tata Technologies IPO- Forensic Analysis

By Nitin Mangal

  • Tata Technologies (TATATECH IN) awaited IPO is set to launch for subscription this week.
  • The company is one of the largest ER&D player that is based in India with revenues crossing INR 44 bn in F23. 
  • Balance sheet remains strong and cash rich. There are however, doubts on revenue recognition policy, forex risk and reliance on Tata Group.

DS Dansuk IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of DS Dansuk is 113,948 won per share which is 28% higher than the high end of the IPO price range (89,000 won). 
  • We estimate bio energy to account for 64.7% of total sales, followed by battery recycle (21.5%), plastic recycle (6.7%), and others (7.1%) in 2023. 
  • DS Dansuk is an eco-friendly company with three core businesses including bio energy, battery recycling, and plastic recycling.

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Nov 23
0

Daily Brief Thematic (Sector/Industry): Aircraft Leasing 101 – Heralding the Golden Era and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • Aircraft Leasing 101 – Heralding the Golden Era
  • What Oct US SEMI Equipment and Sep SIA/WSTS Global Sales Tell Us?
  • HBM’s Impact on DRAM Revenues

Aircraft Leasing 101 – Heralding the Golden Era

By Mohshin Aziz

  • This report explains the nuts and bolts of the aircraft leasing industry in a simple manner, along with its opportunities, risks, and business outlook.  
  • We are in a golden era, underpinned by strong global traffic recovery, and supply shortage due to technical and manufacturer snafus. Airlines are also increasingly struggling to access credit. 
  • AerCap Holdings NV (AER US) is our top pick on its superior business profile and attractive valuation, the second choice is BOC Aviation (2588 HK). 

What Oct US SEMI Equipment and Sep SIA/WSTS Global Sales Tell Us?

By Andrew Lu

  • SEMI reports Oct front/back end equipment billings decline of 14% and 18% y/y, respectively, which was improved from 18% and 24% y/y decline in September, implying early signs of recovery.
  • WSTS/SIA earlier reported September sales of US$44.89bn, up 1.9% m/m and down only 4% y/y (vs. 16% decline in June), suggesting semi sales y/y improvement and pass the cycle trough.
  • We are positive on SOX INDEX likely to break new high of over 4,000 in six months and expect PC/smartphone/training AI semi and DRAM semi/equipment vendors to outperform in short.

HBM’s Impact on DRAM Revenues

By Jim Handy

  • HBM DRAM, used for GPUs in AI, has enjoyed stable pricing while other DRAM prices have collapsed
  • This has attracted the attention of all DRAM makers, but SK hynix has a first-mover advantage
  • Although increased competition will reduce HBM prices, it will have little impact on GPU maker margins

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Nov 23
0

Daily Brief Credit: Morning Views Asia: Lippo Karawaci and more

By | Credit, Daily Briefs

In today’s briefing:

  • Morning Views Asia: Lippo Karawaci

Morning Views Asia: Lippo Karawaci

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

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Nov 23
0

Daily Brief Event-Driven: JSR (4185) – Time To Fight The FUD and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • JSR (4185) – Time To Fight The FUD
  • Ecopro Materials KOSPI 200 Fast Entry Assessment: With K Car as the Outgoing Constituent
  • Geely Stalls As ZEEKR Spins Off
  • S&P/​​​​​​​​​ASX Index Rebalance Preview: Big Impact; A Week From Announcement
  • JSR Corporation (4185 JP): Risk/Reward as SAMR Approves Broadcom/VMware
  • Xiaomi (1810 HK): Outperformance Leads to Passive Selling & Opens Up Trading Opportunities
  • A Potential Fight for Management Rights of Socar Between Lee Jae-Woong and Lotte Rental
  • EQD | A Quick US/Global Equities Correction IS Possible Soon (…a Really OVERSOLD VIX…)
  • Blackstone&Permira/Adevinta: Firm Offer

JSR (4185) – Time To Fight The FUD

By Travis Lundy

  • Many months ago I suggested the JIC Tender Offer JSR Corp (4185 JP) was not overwhelmingly high-priced, but that it would be “heavy” for months to come. 
  • FUD and Flows would widen the spread. And they did.
  • Now the time decay to expected approvals and tender offer start are getting steep. Time to Fight The FUD.

Ecopro Materials KOSPI 200 Fast Entry Assessment: With K Car as the Outgoing Constituent

By Sanghyun Park

  • The fast entry screening spans from November 17th to December 7th. Given its current market cap, we should anticipate the potential success of fast entry.
  • The implementation date will coincide with the effective day of the December rebalancing, which is December 15th. There are precedents of successfully achieving fast entry with such a tight schedule.
  • The setup will be challenging due to the short selling ban. Nevertheless, with an existing position, there may be value in a market timing approach.

Geely Stalls As ZEEKR Spins Off

By David Blennerhassett

  • Geely Auto (175 HK)‘s share price has largely swatted away the pending US-listing of ZEEKR (ZK US).
  • ZEEKR was valued at US$13bn after a US$750mn fund raising in February. At that value, Geely’s 54.7% stake is worth 58% of its market cap.
  • Geely is trading around a six and half year low, and below its five average trailing/forward metrics. 

S&P/​​​​​​​​​ASX Index Rebalance Preview: Big Impact; A Week From Announcement

By Brian Freitas

  • There could be 3 changes for the S&P/ASX 200 (AS51 INDEX) in December. There are unlikely to be any changes for indices higher up the hierarchy.
  • Passive trackers will need to buy between 7-11 days of ADV in the inclusions while the impact on the deletions will be larger at between 11-23 days of ADV.
  • Short interest has decreased on the potential inclusions and increased on the potential deletions. There is significant pre-positioning on some of the stocks.

JSR Corporation (4185 JP): Risk/Reward as SAMR Approves Broadcom/VMware

By Arun George

  • JSR Corp (4185 JP)’s pre-conditional tender offer from JIC is conditional on several regulatory approvals, notably China SAMR approval. JIC can waive the conditions precedent.
  • A takeaway from the Broadcom (AVGO US)/VMware Inc Class A (VMW US) SAMR clearance is that if JIC is willing to commit to restrictive conditions, SAMR approval can be obtained.
  • On 6 November, JSR reiterated a late December tender start. However, with time fast running out, the likely scenario is SAMR conditional approval with a delayed tender start.

Xiaomi (1810 HK): Outperformance Leads to Passive Selling & Opens Up Trading Opportunities

By Brian Freitas

A Potential Fight for Management Rights of Socar Between Lee Jae-Woong and Lotte Rental

By Douglas Kim

  • It was announced that founder of Socar Lee Jae-Woong purchased 336,000 additional shares of Socar. This signals a potential M&A fight for Socar between Lee Jae-Woong/related parties and Lotte Rental.
  • Founder Lee Jae-Woong and related parties currently own 37.8% stake in Socar versus Lotte Rental which has 32.9% stake.   
  • Socar is currently trading at more attractive valuations and we like the company’s aggressive strategy to raise profitability. 

EQD | A Quick US/Global Equities Correction IS Possible Soon (…a Really OVERSOLD VIX…)

By Nico Rosti

  • The VIX INDEX has reached very OVERSOLD levels, it could bounce soon. Our models predict a short-lived bounce, probably 1-week.
  • An increased VIX could trigger panic selling also in Asia-Pacific markets, dragging down returns and increasing volatility.
  • The S&P500 is also WEEKLY OVERBOUGHT, the combination of VIX OVERSOLD and SPX OVERBOUGHT for us is a clear indication: WEEKLY pullback incoming!

Blackstone&Permira/Adevinta: Firm Offer

By Jesus Rodriguez Aguilar

  • Permira and Blackstone announced a NOK 115.0/share offer, two months after their approach was unveiled. 3-month VWAP premium is 52.6%. The offer represents 18.3x EV/NTM Fwd EBITDA (vs. 14.6x comparables)
  • The three largest shareholders (c.72.3%) communicated at the outset their support, so it’s a done deal. 90% condition can be waived. Board says price “financially fair”, but cannot recommend it.
  • I set my TP at NOK 115. The consortium could achieve an IRR of 17.8% by year 8. Spread is 3.3%/6.65% (gross/annualised, assuming settlement by 31 May). Long.

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